NAASHIR v NAQID [2024] DIFC CFI 079 — Dismissal of appeal against USD 508 million immediate judgment (23 July 2024)

The DIFC Court of First Instance has affirmed a massive financial liability, rejecting an attempt by personal and corporate guarantors to challenge an immediate judgment for over half a billion dollars.

What was the nature of the dispute between Naashir and the eight Defendants regarding the USD 508,639,667.08 liability?

The litigation concerns a high-value enforcement action initiated by the Claimant, a United States national banking association acting as a Security Agent for a syndicate of lenders. The dispute centers on the failure to repay a substantial facility agreement originally entered into on 25 March 2016. Following a drawdown of USD 490 million and subsequent defaults in repayment starting in 2019, the Claimant sought to enforce personal and corporate guarantees against the Defendants.

The stakes involve a total judgment sum of over half a billion dollars, reflecting the outstanding capital, interest, and fees accrued under the facility. The Defendants, including the founder of the borrower entity and several ADGM-incorporated special purpose vehicles, contested their liability by arguing that amendments to the facility agreement—specifically the 2019 Amendment and Restatement Agreement (ARA)—were made without their proper consent, thereby discharging their obligations. The Court rejected these arguments, maintaining that the borrower held the authority to amend the terms relevant to the transaction.

My Order, in favour of the Claimant to the total value of USD 508,639,667.08 (plus a daily interest rate of 174,780.62 until the date of full payment), was issued originally on 7 May 2024 and re-issued to reflect the accurate owed amount on 21 June 2024. 30.

Which judge presided over the PTA Application in CFI 079/2022 and when was the order issued?

The application for permission to appeal (PTA) was heard and determined on paper by H.E. Deputy Chief Justice Ali Al Madhani of the DIFC Court of First Instance. The final order dismissing the application was issued on 23 July 2024.

What were the primary legal arguments advanced by the Defendants in their PTA Application against Naashir?

The Defendants (the Appellants) sought to set aside the immediate judgment, arguing that the Court should have directed a formal trial to ascertain their liability. Their arguments were multifaceted, spanning seven distinct grounds of appeal. Primarily, they contended that the Court erred in its interpretation of the guarantee agreements, particularly regarding the impact of the 2019 ARA on their liability. They argued that the amendments to the facility agreement were outside the scope of their original guarantees, invoking principles that would typically discharge a guarantor if the underlying contract is varied without their consent.

Furthermore, the Second Defendant specifically requested a stay of proceedings, citing concurrent insolvency litigation pending before the Dubai Courts. The Defendants also challenged the methodology used to calculate interest, specifically the application of synthetic USD 3-month LIBOR. The Claimant, in its opposition, maintained that the Defendants’ arguments were merely a re-litigation of points already addressed and rejected during the initial summary judgment hearing, asserting that the grounds of appeal lacked any real prospect of success.

The Sixth Ground is that I erred in fact permitting the Claimant to apply synthetic USD 3-month LIBOR to calculate and claim interest on the loan amount. 61.

What was the core jurisdictional and doctrinal issue the Court had to resolve regarding the validity of the guarantees?

The central doctrinal issue before the Court was whether the Defendants, as personal and corporate guarantors, remained bound by the facility agreement despite subsequent amendments and corporate restructuring. The Court had to determine if the borrower possessed the requisite agency to bind the guarantors to the 2019 ARA and whether the "all monies" nature of the guarantees survived the changes to the underlying facility. The legal question was whether the Defendants’ liability was discharged under the rule in Holme v Brunskill—which generally holds that a guarantor is discharged if the underlying contract is varied without their consent—or if the terms of the facility agreement and the specific guarantees granted the Claimant the authority to amend the facility without further express consent from the guarantors.

How did Deputy Chief Justice Ali Al Madhani apply the "real prospect of success" test to the Defendants' appeal?

In evaluating the PTA Application, the Court applied the threshold set out in RDC 44.8, which requires that an appeal must have a "real prospect of success" or be supported by a "compelling reason" for a hearing. The Judge systematically reviewed each of the seven grounds of appeal, finding that the Defendants failed to present any new evidence or novel legal arguments that would warrant a departure from the original judgment.

The Court emphasized that the borrower was authorized to act on behalf of the guarantors regarding relevant amendments. The reasoning focused on the fact that the amendments were directly related to the transaction for which the guarantors were liable. By failing to demonstrate that the Judge had erred in law or fact, the Defendants’ application was deemed an attempt to re-litigate settled matters.

The important term in Article 1.6 is “relevant”. All amendments, supplements and variations made were relevant to the transaction in the Facility Agreement for which the Personal Guarantors were liabl

Which specific RDC rules and statutory provisions did the Court rely upon in dismissing the appeal?

The Court’s decision was grounded in the Rules of the DIFC Courts (RDC). Specifically, the Court relied on RDC 44.8 to determine the threshold for granting permission to appeal. The original immediate judgment, which the Defendants sought to overturn, was granted pursuant to RDC 44.29, which allows for summary disposal of claims where a party has no real prospect of succeeding on the claim or defense. The procedural compliance of the appeal notice was also assessed under RDC 44.29(1) and (2), which mandate the inclusion of specific grounds of appeal and a skeleton argument.

How did the Court utilize English and DIFC precedents in its reasoning?

The Court referenced Holme v Brunskill (1878) and Triodos Bank NV v Dobbs [2005] EWCA Civ 630 to address the Defendants' arguments regarding the variation of the underlying facility agreement. These authorities were used to contrast the general principle of guarantor discharge with the specific contractual provisions in the facility agreement that allowed for amendments. The Court found that the terms of the guarantees in this case were sufficiently broad to preclude the application of the Holme v Brunskill defense, as the guarantors had effectively consented in advance to the types of amendments that occurred.

What was the final disposition of the PTA Application and the resulting orders regarding costs?

The Court dismissed the PTA Application in its entirety, confirming the validity of the immediate judgment for USD 508,639,667.08. The Court ordered that the Defendants pay the costs of the application on the standard basis. These costs are to be assessed by the Registrar if the parties fail to reach an agreement on the quantum. The judgment remains enforceable against the First, Second, Fifth, Sixth, Seventh, and Eighth Defendants.

What are the wider implications of this ruling for DIFC commercial litigation practice?

This decision reinforces the high threshold for challenging immediate judgments in the DIFC, particularly in the context of complex syndicated lending. Practitioners must note that the Court is unlikely to entertain "re-litigation" of arguments that were, or could have been, raised during the initial summary judgment phase. Furthermore, the ruling underscores the robustness of "all monies" guarantee clauses and the efficacy of agency provisions within facility agreements, which allow borrowers to manage amendments without requiring constant re-execution of guarantees. Litigants should anticipate that the DIFC Courts will prioritize the commercial certainty of these agreements over attempts to invoke technical defenses based on contract variation.

Where can I read the full judgment in Naashir v Naqid [2024] DIFC CFI 079?

The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0792022-naashir-v-1-naqid-2-naazir-3-nabhan-4-nawaf-5-najeeb-6-nameer-7-nasim-8-nuzhat

Cases referred to in this judgment:

Legislation referenced:

• Rules of the DIFC Courts (RDC) 44.8
• Rules of the DIFC Courts (RDC) 44.29
• Rules of the DIFC Courts (RDC) 44.30